This agreement is an addition to a $400bn deal signed earlier this year whereby Chinese CNPC will buy 38 bcm from Russian GAZPROM annually for 30 years starting in 2018. The second agreement signed yesterday is for 30 years as well. Therefore up to 68 bcm of Russian gas is to be delivered to China annually, which will make China the biggest buyer of Russian gas.
The second agreement did not spell good news for the rest of the world’s gas suppliers, neither did the first. Adrian Wood, analyst at Macquarie Group Ltd, said to Bloomberg today that this agreement has added pressure to Australian gas suppliers where costs to build new plants are high.
CNPC has also signed a framework agreement with OAO Rosneft for China National Oil and Gas Exploration and Development to buy 10% stake in Russia’s Vankorneft, Rosneft’s subsidiary.
Russia is moving away from dependence on Europe’s gas purchases as relations with EU do not improve and China will secure almost a fifth of the gas supplies it needs by the end of the decade, Bloomberg reports.
The gas is to be supplied through the “west route” of the Altai region; the pipelines are yet to be built. In the first agreement signed earlier in May the gas supply is to be pumped via the “eastern route” - Power of Siberia pipeline.
Vladimir Putin and the Chinese President Xi Jinping have also discussed the possibility of payments in Chinese yuan, Russian presidential spokesman Dmitry Peskov was cited as saying by RIA Novosti.
The framework agreement signed leaves many details to be negotiated and at this stage only the volumes, route and timeframes of Russian gas supply to China have been outlined.
Natural Gas has seen a lift in trading whilst the lack of detail on the agreement has not affected shares for the gas companies as yet.
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